Mint Primer: This way out: Why so many startup founders are being shown the door

Sam Altman, CEO, OpenAI.
Sam Altman, CEO, OpenAI.


An official statement from the OpenAI board alleged that Sam Altman was ‘not consistently candid in his communications with the board, hindering its ability to exercise its responsibilities’

NEW DELHI : OpenAI chief executive and founding team member Sam Altman was last week fired from the company he helped make famous. Many startup founders have been made to leave their companies. What’s behind this trend? Mint explains.

Why was Altman asked to step down?

An official statement from the OpenAI board alleged that Altman was “not consistently candid in his communications with the board, hindering its ability to exercise its responsibilities." Industry reports claimed differences in opinions between OpenAI’s board members, many of whom are also founding members, and Altman, were the key reason. The firm said the board didn’t have “confidence in (Altman)’s ability to continue leading OpenAI." However, key investors have since backed Altman. On Monday afternoon, Microsoft chairman Satya Nadella said Altman will “lead a new advanced AI research team" in MS.

Does a founder’s exit really matter?

Any post-funding startup venture typically has a board of directors, but is led from the front by a chief executive who becomes the face of the venture. For instance, ChatGPT maker OpenAI had 12 founding members, but only Elon Musk and subsequently Sam Altman, who served as chief executive until 17 November, were prominently known in public. The exit of such founding executives, especially those who are public figures, is generally a statement of intent in the industry that the company intends to take a different course of action—be it in policy, operating strategy, or any other way.

Who are the other notables to leave their own ventures?

Steve Jobs was ousted by Apple’s board in 1985—before returning in 1997. Today, it is the most valuable company in the world. Meta founder Mark Zuckerberg has come under regulatory scrutiny. Zilingo’s Ankiti Bose, BharatPe’s Ashneer Grover, WeWork founder Adam Neumann and Uber founder Travis Kalanick have made controversial departures.

What are the regulations here?

A board of directors votes to decide, especially if the person is a cofounder. Much of the process is governed by the firm’s bylaws, and the contract between the executive and the board. Usually, founders are made to relinquish their equity for million-dollar payouts. WeWork founder Adam Neumann won a $445-million severance in 2021, after he was pushed out. Misdemeanour-led issues are more complex—Uber founder Travis Kalanick was reported to have left his company without a severance package.

Does a founder’s exit impact the firm?

While Uber has continued to grow in revenue since Kalanick’s ouster in 2017, other companies can take uncharted routes. Following Jack Dorsey’s exit from Twitter in 2021, the company ended up being sold to Elon Musk and is now private. Market data suggests that Twitter, now X, is no longer worth the money Musk bought it for. Investors usually see a founder’s exit as course correction. This corporate practice also seeks to limit singular control of operating decisions, thereby cutting losses that investors may face.

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